Christmas Crackers are a British Tradition. They're a large cylinder about the size of the tube in the middle of a roll of Toilet Paper that are wrapped like a present. Inside the wrapping are hidden a strip that you and someone pull and they pop with a small Crack from a tiny explosive charge. The result is the crack that is about the loudness of someone clapping their hands, and then you can open your surprise.
Inside their wrapping are gifts and surprises. You get to open these brightly wrapped presents and find a variety of things and almost always a paper crown so everyone gets to be king or queen for the moment.
Isn't Democracy wonderful?
Depending on the price of the crackers, you can get some very simple and cheap gifts or some rather expensive ones. Since I've never found a place that sells the nice ones, the gifts inside have been the quality of what you used to find inside of a Cracker Jack box. Plastic Animals, Whistles, and Jokes.
The idea isn't really that you find a diamond inside unless you are planning on proposing to someone. The idea is to foster a good time with friends and family and to make your time more memorable. A nice touch to bring to a party I'd say and they're uncommon enough that you can start a new family tradition easily.